2001 (3) TMI 46 - HC - Income Tax

High Court upholds development rebate on plant & machinery under Income-tax Act, clarifying depreciation & rebate provisions.

The High Court of Delhi ruled in favor of the assessee, affirming the Tribunal's decision to allow development rebate on plant and machinery costing less ... Depreciation, Developement Rebate Issues:Interpretation of provisions under section 32(1)(ii) and section 33(1)(b) of the Income-tax Act, 1961 regarding the allowance of development rebate on plant and machinery costing less than Rs. 750.Analysis:The judgment by the High Court of Delhi involved two references concerning the assessment years 1969-70 and 1971-72, both addressing a common question referred by the Income-tax Appellate Tribunal. The question revolved around the justification of allowing development rebate on items of plant and machinery costing less than Rs. 750. The assessee, a public limited company, claimed deductions under section 32(1)(ii) for items costing less than Rs. 750 and development rebate for such new items. The Income-tax Officer initially disallowed the development rebate on these items, arguing that once a deduction was obtained under one provision, further deductions were not permissible. However, the Appellate Assistant Commissioner disagreed and allowed the development rebate. The Tribunal upheld the assessee's entitlement to development rebate under section 33(1)(b) if the requisite reserve was created, emphasizing the distinction between depreciation and development rebate. The court was tasked with determining whether both depreciation and development rebate were allowable in this scenario.The provisions under section 32(1)(ii) and section 33(1)(b) were analyzed to establish their independent operation in distinct contexts. Section 32 allows depreciation at 100% based on the actual cost of each plant and machinery, subject to the specified limit of Rs. 750. On the other hand, section 33 grants development rebate based on different criteria outlined in the Income-tax Rules. The court rejected the Revenue's argument that both sections served the same purpose, emphasizing that they aimed at achieving different objectives. Notably, the allowance of development rebate under section 33 is subject to various conditions and can be withdrawn under specific circumstances. Therefore, the court concluded that both depreciation and development rebate were permissible in this case, affirming the Tribunal's decision in favor of the assessee against the Revenue.In conclusion, the High Court of Delhi ruled in favor of the assessee, affirming the Tribunal's decision to allow development rebate on plant and machinery costing less than Rs. 750. The judgment clarified the distinct purposes of sections 32(1)(ii) and 33(1)(b) under the Income-tax Act, emphasizing the independent operation of depreciation and development rebate provisions. The court's analysis highlighted the specific conditions and objectives associated with each provision, ultimately supporting the assessee's claim for both depreciation and development rebate in the case at hand.